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Uncle Sucker's Trade Deficit worsened in November
Howard Richman, 1/11/2013

The Commerce Department reported this morning that, overall, the U.S. seasonally-adjusted trade deficit deteriorated from $42.1 billion in October to $48.7 billion in November. These worsening trade balances subtract from U.S. economic growth but add to the growth of our trading partners. They are being produced by the governments of America's trading partners, especially the governments of South Korea, China and Japan.

South Korea

In 2012, President Obama signed a "free trade" agreement with South Korea. The agreement lets South Korea continue to manipulate the won-dollar exchange rate in order to increase market share of Korean products and reduce market share of U.S. products in U.S. and Korean markets. The Federal Reserve reported that South Korea spent 4.24% of its GDP on currency manipulations between September 2009 and September 2010.

The agreement went into effect in March 2012. Ever since, the U.S. merchandise trade deficit with South Korea has deteriorated. descending to $16 billion for the 12 months ending in November as shown in the graph below:

China

According to the Asian Development Bank, the People's Bank of China added $669.8 billion worth of foreign assets to its reserves in 2011. Partly as a result of these currency manipulations, Chinese products continue to gain market share vs. U.S. products in world markets.

The Obama administration has tolerated this. Outgoing Treasury Secretary Timothy Geithner issued biannual reports to Congress which pretended that China was not manipulating its currency, rather than take the issue to the International Monetary Fund whose articles of agreement prohibit currency manipulations.

As a result, the U.S. trade deficit with China has deteriorated steadily throughout the Obama administration. For the 12 months ending in November, the U.S. merchandise trade deficit with China was a negative $314 billion and worsening steadily, as shown in the graph below:

ChinaTradeThru.1112.gif

Japan

The U.S. trade deficit with Japan has not been getting worse in recent years, but that is about to change. Japan's new Prime Minister is demanding that Japan's central bank resume its mercantilism, Ambrose Evans-Pritchard wrote on January 1:

Japan’s new premier Shenzo Abe is sweeping into office like Roosevelt in 1933, commanding the central bank to do whatever it takes to defeat deflation, deliver 3pc NGDP growth, and drive the dollar-yen rate [down] to 90.

So, into the foreseeable future, Uncle Sucker will continue to give away its industries and its potential economic growth to all those governments who wish to take them.

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  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

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  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

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  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]